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PBF sells Del. City hydrogen plant as it manages virus impact

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PBF Energy, the owner and operator of the Delaware City Refinery, has agreed to sell its hydrogen plant to Air Products and Chemicals. | DBT PHOTO BY JACOB OWENS

DELAWARE CITY – PBF Energy Inc., the New Jersey-based owner and operator of the Delaware City Refinery, has agreed to sell its hydrogen plants to Air Products and Chemicals, based in Lehigh Valley, Pa.

The sale won’t impact operations of PBF’s petroleum refinery but offloads the hydrogen steam methane reformer (SMR) plants that produce hydrogen used in the refining process. Air Products also reportedly signed a long-term supply agreement for hydrogen to the PBF refineries.

In total, five such SMR plants at three refineries, at Delaware City and Torrance and Martinez, Calif., are being sold by PBF to Air Products in a $530 million deal announced Monday. It is targeted to close in April.

The deal comes as PBF, which employs hundreds at the 5,000-acre site in Delaware City, deals with plummeting oil prices and likely historic low demands for fuel as airlines cancel flights and millions of residents have been urged to stay at home amid the COVID-19 crisis. It reported Monday that it was operating its refineries at 30% below expectations.

In efforts to weather the storm, PBF also announced Monday that it expected to lower its 2020 operating expenses by about $125 million, driven by a significant reduction in discretionary activities and third party services, and reduce planned capital expenditures by $240 million, primarily at its newly acquired refinery in Martinez, Calif.

It has also suspended its 30-cent a share dividend and announced that its top executives would take pay cuts of 50%, with Chairman and CEO Thomas Nimbley taking a 67% pay cut.

In a statement announcing the moves, Nimbley said the company is “focused on generating and preserving the liquidity needed for the duration of the near-term, economic impacts of stay-at-home orders and the longer-term recovery of demand for our products.”

News of the measures were well received by Wall Street on Monday, as share value rose 20% by the end of the day closing at $7.63. The company is still dealing with a rough year, however, sitting more than 75% off from its 52-week high of $35.15 per share value.

The Delaware City Refinery’s SMR plant will find a familiar name in its new owner. Air Products is a large supplier of hydrogen to refineries, already operating five such production plants in California. The hydrogen helps make cleaner burning transportation fuels by removing impurities like Sulphur, olefins and aromatics from crude oil.

Air Products, which reported fiscal year 2019 sales of $8.9 billion and holds a current market capitalization of about $45 billion, also supplies hydrogen for fueling and fueling infrastructure in California to support the growing fleet of hydrogen fuel cell electric vehicles.

“Air Products has a very strong balance sheet. This puts us in an outstanding financial position to execute our strategy of investing in long-term onsite deals, which includes asset acquisitions like the one we are announcing today. With this acquisition, not only do we gain five SMR plants, but we also secure a long-term hydrogen sale of gas agreement with an existing customer who is one of the largest independent refiners in North America,” said Seifi Ghasemi, chairman, president and CEO of Air Products, in a statement.

By Jacob Owens

[email protected]

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